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Posts Tagged ‘Federal Reserve’

Jerome Powell, Federal Reserve Chairman.

“We print it [money] digitally.  So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government securities.  And that actually increases the money supply.”

I probably shouldn’t be, but I often am, amazed an God’s providential timing in providing illustrations of points I plan to talk about.  As I’ve been thinking about this series of posts, I planned this week to write about the Fed and the process of money, more properly currency, creation. 

In one respect, the process the Fed uses to bring currency into being is fairly easy to grasp.  On the other hand, it is so obviously fraudulent that it shocks people when they hear about it. “That simply can’t be.” is, I think, a fairly common reaction. 

In the Lord’s providence, and quite apart from any planning by me, it so happened that Jerome Powell, the Chairman of the Federal Reserve, was interviewed on 60 Minutes last Sunday by correspondent Scott Pelley of CBS News.  You can watch the full interview and ready the transcript here.  In my opinion, Pelley did a good job asking important questions of Powell, especially concerning the process by which the Fed prints money.  At one point, Pelley asked Powell about the Fed’s response to the coronavirus (CV) crisis, and Powell ticked off a list of the Fed’s market interventions.  Here’s what was said next,

PELLEY: Fair to say you simply flooded the system with money?

POWELL: Yes. We did. That’s another way to think about it. We did.

PELLEY: Where does it come from? Do you just print it?

POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.

There you have it.  The Fed chairman admitting on national television that the Fed creates money and uses it to buy, “Treasury Bills or bonds or other government guaranteed securities.”  He also noted that this activity, “actually increases the money supply.” 

What I would like to do in today’s post is to examine these statements – Powell’s saying that the Fed “creates money” and that this act “actually increases the money supply” – in greater detail.  Just how does the Fed create money and what are the effects of “increasing the money supply” on our daily lives? 

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Mnuchin.Unemployment

U.S. Treasury Secretary Steve Mnuchin warns that unemployment could reach 25%, a level equal to that of the Great Depression.  But according to economist John Williams, not only are we already at 25% unemployment, we’re well  past it.

Assuredly, I say to you, you will by no means get out of there till you have paid the last penny.

  • Matthew 5:26

 

“Trump administration is ‘willing to spend whatever it takes’ to mitigate coronavirus crisis says Steven Mnuchin as he continue to facilitate bipartisan negotiations – but admits unemployment could hit 25%.”

That somewhat longish headline leads story from today, May 10, 2020 in the Daily Mail.  A few things are worth noting here.  First, the current economic crisis is called, inaccurately, the “coronavirus crisis.”  The massive unemployment and terrifying declines in industrial production that have hit the U.S. and other Western nations has not been caused by the coronavirus.  It is the government’s response to the coronavirus that is the immediate cause of the 20 + million private sector jobs lost in month of April.  To put that number is some perspective, the previous record monthly job loss number was 800,000 + which occurred during the height of the 2008 financial crisis in March 2009.  The virus did not shut down the economy and cause record job losses; the politicians and bureaucrats did.  By calling it the “coronavirus crisis,” politicians are attempting to shift the blame from themselves to a virus.

Second, the negotiations in which U.S. Treasury Secretary Steve Mnuchin is immersed involved more money printing by the Federal Reserve and more deficit spending by Congress.  The truth, that Fed money printing and prodigal spending by Congress are the root cause of our current economic crisis, is nowhere to be seen.  Treasury Secretary Mnuchin wants you to believe that the cure for our financial woes us is doing more of the same things that put us in this mess in the first place.

Third, note well that Steve Mnuchin is facilitating “bipartisan negotiations.” As a lifelong Republican – I’m from the Tea Party/Ron Paul wing of the Republican party, not the mainstream, but nevertheless I am a Republican – I hate to admit that the my own party is in part responsible for the incompetent and immoral response to the coronavirus, a response that has included doling out literally trillions of dollars, dollars all which had to be borrowed into existence by the combined efforts of Congress and the Fed.  I would like to blame all of this on the Democrats, but that is simply would not be honest.  It is Democrats and Republicans conspiring together to spend money we don’t have in ways that were never authorized by the Constitution.  With a few exceptions, nary a peep of protest is heard from either party concerning the shockingly large spending programs already put in place, programs which Rep. Thomas Massie (R-KY) called, “the largest wealth transfer in history.”  And now Congress is colluding with the Trump administration on even more deficit spending.

Fourth, Steve Mnuchin admits that unemployment could hit 25%.  Here’s some news for Mr. Mnuchin, most likely unemployment is already well north of that figure.  Actually, it’s probably not news to him at all.  One suspects he already knows this.  What a lot of people don’t know is that the government changed the way it calculates unemployment.  In 1994, the Bureau of Labor Statistics (BLS) stopped counting long-term discouraged workers – a long term discouraged worker is someone who has not attempted to find work in the last four weeks – as unemployed.  Previous to that, such person were included in the unemployment calculations released by the BLS.  John Williams is an economist who runs his own website called Shadow Stats.  Among the services he provides is a monthly calculation of the unemployment rate using government’s old method.  Want to take a guess at where he puts current unemployment?  Try 35%!  If Williams’ numbers are anywhere near accurate, we already have a far worse employment situation than what occurred during the Great Depression, which is usually estimated at 25%.  Presumably, that’s the reason Mnuchin picked the number that he did.

So much for the Daily Mail’s headline.

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Fauci

Dr. Anthony Fauci speaks at a White House press briefing.

The so-called corona virus (CV) pandemic has taken the world by storm.  Like many people, this author had never so much as heard the term “corona virus” until about three or four months ago.  But writing now in early May 2020, it seems as if it’s been with us forever.

One of the barriers to thinking clearly about the CV pandemic and resulting lock down of the economy was the remarkable speed at which it all occurred.  It seemed that one day all was well, and the next that governors across the country were ordering their citizens to “shelter in place.”  It was almost as if the entire nation were sucker punched at once.  One day we were going about our business, working our jobs as we always had, and the next we were working from home or not working at all.  Who could ever have imagined such a thing as recently as the beginning of this year?

The official narrative is that the virus is an unexpected event, originating in China.  Despite the Chinese leadership’s heroic efforts to contain it, the virus managed to spread throughout all the world.  Here in the US, Anthony Fauci is officially hailed as a hero and governors who locked down their states are thought to have taken bold action to save the nation from an even higher death count than has been reported.  They are heroes.  And the more severely they locked down their states, the more heroic they are.

Although the rapidity at which the crisis emerged and my unfamiliarity with pandemics made analysis difficult at first, the whole CV pandemic always seemed more than a bit suspect to me.  And the longer it has gone on and the more information that has come out, the more my original suspicions have been confirmed.  Below are thirteen reasons why I doubt CV narrative.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

Proverbs 22:3

When I began writing this series back in early August, I did so as a response to a hard selloff in the stock market that followed the Fed’s decision at the end of July to lower interest rates.  As I noted in that first post in this series, I decided on the title “The Ongoing Financial Crisis of 2008” because it is my view that the market melt down that began in earnest in the fall of that year has never really gone away.

What occurred was that central banks took money printing into hyper-drive in late 2008 and early 2009 and managed to reflate the stock market bubble that had popped earlier in 2008.  I likened their actions to what the prophet Ezekiel called plastering walls with untempered mortar.  In other words, the Fed addressed the symptoms of the financial crisis, but not the cause of the crisis itself.

Eleven years later, this is still the case.  Nothing has been fixed.  Nothing has improved.  In fact, not only have things not improved, they have gotten far worse.

The 2008 crisis, what is sometimes called the Global Financial Crisis or the GFC, was a debt crisis.  There was simply more debt in the financial system than could be repaid.  So what was the response of the Fed and the federal government?  They conspired to create even more debt to solve a crisis caused by too much debt, as if somehow more of the same thing that caused the problem in the first place was also the solution!

To borrow an English proverb, this was the financial equivalent of bringing coals to Newcastle.

If a man is an alcoholic, you don’t cure hm by giving him another bottle of whiskey.  While another bottle may make him feel better for the moment, in the long run it will kill him.  Yet this is not so very different from what governments and central banks all over the world did in 2008.  They went on a spending and money printing spree, which managed to kick the can down the road but did nothing to solve the underlying problem.

As a result, while the economies of the United States and other Western nations have appeared to recover their health, the underlying fundamentals of those economies have grown steadily worse.  Just in America, our national debt has more than doubled since 2008 and now sits at $23 trillion.

Just to give you as sense of how fast debt is now piling up, it took the federal government from the founding of our country until 1982 to compile $1 trillion in debt.  Now, even mainstream sources are predicting that the annual deficit for fiscal year 2020 – this is the federal government’s fiscal year which began on October 1, 2019 and ends on September 30, 2020 – will be in excess of $1 trillion.  In other words, the federal government is adding the same nominal amount of debt in a single year that it previously took about 200 years to accrue.

Oddly, no one in Washington seems the least bit concerned about this.  Not the Democrats.  Not the Republicans.  No one except an odd fellow here and there such as Senator Rand Paul.

The Bible teaches us that debt is a burden.  At best, it is something that is to be used prudently and paid off timely.

Yet we all live with a debt-based financial system that, not only encourages debt, but actually requires debt to increase at a faster and faster pace just to keep the system from imploding.  This debt-based system of financial perdition was put in place in the United States with the passing of the Federal Reserve Act of 1913.  The Fed has been destroying not only the financial fabric of the nation, but its moral fabric as well, for over 100 years.

What is true of America is also the case with all other Western nations.

We have become enslaved by debt, and all the more with each passing year.

But just as untempered mortar quickly shows itself when exposed to a little rain, so too are the phony fixes put in place in 2008 beginning to come unglued.  In fact, this author has been amazed by how badly the financial system has deteriorated in the past three months he has been writing this series.

In just that short time, the Fed has, apparently on a permanent basis, started baling out the overnight repo market, twice cut interest rates and resumed Quantitative Easing (QE).  These are all various forms of money printing, which have the long-run effect of weakening the dollar resulting in higher prices and a lower standard of living.

And these are just the activities they openly acknowledge.  In the opinion of this author, the Fed rigs all financial markets 24/7 to provide the appearance of normalcy.  Stocks, bonds, real estate and oil are propped up, while precious metals – gold and silver – and crypto currencies are suppressed.

Bet even as the Fed rigs all markets and the government statisticians put out phony economic numbers designed to understate unemployment and inflation while overstating economic growth, there are some stats that cannot be rigged.

If one looks closely at the economic numbers that are put out, he will see that, all the economic cheer leading from the administration aside, there is almost no good economic news to be found.  Here is just a sample of recent headlines showing just how serious things are getting:

 

I could easily produce many more such headlines, but I trust the reader gets the point that, economically speaking, things aren’t all that great out there.  What’s even more remarkable is that these headlines are showing up at a time when the Fed has put the money printing pedal to the metal, intervening more aggressively in the market than at any time since the height of the 2008 crisis.

But while all that money printing has, apparently, not turned around the economy, the stock market is hitting new record highs.

So which is it?  Are we to believe, the stock market, the politicians and the Wall Street cheer leaders, who tell us everything is awesome, or the economic statistics which point to an oncoming recession?

For my part, I’ll trust the economic statistics.  Not, mind you, because I think economic statistics furnish us with knowledge.  Only the 66 books of the Bible do that.  No, it’s not that economic statistics are true that causes me to trust them.  Rather, it is that the monetary and fiscal policies pursued by central banks and Western governments – that is to say, money printing and deficit spending – are morally bankrupt and will, in the long-run, inevitably lead to financial bankruptcy as well.

All this naturally leads to the question, when will the next economic crisis hit?  My answer:  I don’t know.

In my opinion, the entire world economic system should have collapsed in 2008, but extraordinary action by the world’s central banks managed to resuscitate the system.  The financial system could easily have collapsed any time since then, but for the ongoing interventions – both public and secret – of central banks and governments ever since.

In short, we’ve all been living on borrowed time.

So how much more time are the masters of the universe able, or even willing, to buy?  I don’t know.

In my opinion, the apparent quickening pace of the slide into recession seems to indicate that the time before the next major financial crisis is relatively short.  That said, this author has been amazed at the ability of the establishment to maintain order as long as they have, so I would caution against any predictions that the wheels are definitely going to come off in the short-term.  Quite obviously, the Trump administration is doing everything in its power to maintain normalcy until after the November 2020 elections, which are just under a year away.  Can they hold things together until then?  We’ll see.

But regardless of the timing, it is my thesis that a major financial crisis is coming.  This will not be a garden variety recession.  It will be like the 2008 crisis, only worse, for the simple reason that the debt crisis has gotten worse.  Instead of dealing honestly with things in 2008, all we did was double down on the debt and kicked the can down the road.

But the point is coming when the can is no longer kickable.

That’s when things will get interesting.

And that’s the reason I’ve written this series on prepping.  The bill for our debts is coming due, and I have a great burden to alert my fellow Christians to this, so that they may, as the prudent man in Proverbs 22:3, foresee trouble coming and hide themselves.

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Financial Crisis

A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

Dow hits record as stock market rally extends into 5th week” ran Monday’s AP headline. The same day, CNBC was even more ebullient, proclaiming “After Dow hits a record, analysts believe these stocks will lead the measure to its next milestone.” So what shall I say? The past three months I’ve been writing series talking about the ongoing financial crisis of 2008 and not only are the stock markets refusing to crash, they’re hitting records highs! To make matters worse, Yahoo reports that “Gold Suffers Worst Week in Three Years as Bulls Run for Cover.”

I guess I should just give up writing about financial matters, right?

Or maybe not.

You see, my thesis that the American economy has never recovered from the 2008 financial crisis is not based upon where the Dow or S&P averages close or the price action of gold and silver in a particular week.

As a Scripturalist, that is, as someone who believes that the Bible has a systematic monopoly on truth, I seek to analyze the markets and the overall economy, not by what the day’s headlines report, but by the propositions found in the Word of God.

When looked at in light of the Scriptures, we can see that what is hyped as the greatest economy ever is, in reality, a house built upon sand, which, in the opinion of this author, the coming economic storms will sweep away.

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Eccles_2

The Marriner S. Eccles Federal Reserve Board Building in Washington D.C.

“[T]he Fed has one power that is unique to it alone: it enables the creation of money out of thin air.”

    – Ron Paul, End The Fed

The welfare state, the warfare state and the loss of liberty.

Inflation, extreme income inequality and the destruction of the middle class.

Exploding federal debt, skyrocketing federal deficits and a financial system on the brink of failure.

What do all these things have in common? To one degree or another, they are all the effects of the Federal Reserve System, more commonly known as the Fed, America’s central bank.

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Financial Crisis
A prudent man foresees evil and hides himself, but the simple pass on and are punished.

    Proverbs 22:3

It’s been a couple weeks since my last posting in this series, but there certainly has been no break in the flow of events. In the intervening time since my last entry on 10/20/19, there have been several noteworthy bits of financial news. Of those, the most important was the announcement from the Fed this past Wednesday that they had decided to lower the Fed Funds rate another quarter point. This was the third time the Fed has lowered interest rates in the past three months.

Now any such decision by the Fed is important given the tremendous power of the Fed to push financial markets one way or the other. The big takeaway, however, is what this decision says about the Fed’s assessment of the economy. Despite all the propaganda from the administration saying the economy is doing great, the decision by a the Fed, or any other central bank, to lower interest rates is a tacit admission that the economy is not doing well. If the economy were doing well, the Fed would be raising rates, not reducing them.

When you add to the Fed’s lowering of interest rates the ongoing (permanent?) bailout of the overnight repo market and the restart of quantitative easing (i.e. money printing), it is obvious that the those closest to the situation think that the economy is seriously struggling.

One of the justifications put forward for lowering interest rates and money printing is that there is no price inflation. But even according the Consumer Price Index (CPI), the official measure of price inflation put out by the Bureau of Labor Statistics, the CPI-U (the broadest measure of inflation) rose 1.7% for the period September 2018 to September 2019. But beware of official government statistics! Over the years, the federal government has changed the way it measures inflation. And it should come as no surprise that the change has been in the direction lowering reported inflation.

Economist John Williams runs a website called Shadow Stats where he purports to calculate inflation the old fashioned way. His most recent calculations of the CPI-U tell a very different story from the figures put out by the Bureau of Labor Statistics (BLS). As you can see Williams most recent numbers come in a little higher than those of the BLS. According to Williams, the official method of calculating inflation used prior to 1990 shows inflation running at a more than 5% annual rate. If you look at this calculations with the pre-1980 method, the difference from the current official number is even more striking. The pre-1980 method of calculating inflation indicates that the current inflation rate is almost 10% annually!

If Williams is even close to being right, all this latest round of money printing by the Fed is like dumping gasoline on a raging fire, meaning we can expect to see much higher inflation numbers going forward.

Here’s a critical idea to keep in mind when talking about price inflation: Inflation is always and everywhere a monetary event. By this I mean that inflation is always the fault of money printing by central bankers. You can watch the evening news faithfully for decades on end and you will not hear this. Ditto with the financial channels such as CNBC and Fox Business. They will never tell you the simple reason for price inflation: Central bank money printing.

Why is this? It’s not an accidental oversight. The mainstream press is essentially the propaganda organ of the establishment, and central bank money printing is the financial black magic the establishment uses to increase its wealth and power at the expense of ordinary Americans. The powers that shouldn’t be – Washington politicians of both parties, Wall Street bankers and big shot investors together with a gaggle of academic theorists and news media talking heads – have a great scam going and do not want to let ordinary Americans know how badly their being ripped off and by whom.

To borrow a turn of phrase from Warren Buffett, “If you’ve been playing poker for half an hour at the table and you still don’t know who the patsy is, you’re the patsy.”

Ordinary Americans have been the patsies of the financial elite, of whom Warren Buffett is one, since the founding of the Fed over 100 years ago. The Fed’s inflation games are not only bad policy, they are also sinful in the eyes of God. The Bible unequivocally condemns “divers weights and measures” which God calls an “abomination” (see Proverbs 20:10 and 20:20 for example), which merchants of the day used to rip people off in much the same way central bankers, politicians and their super wealthy clients do today. It’s high time people woke of to this fact. End the Fed!

There’s much more that could be said about inflation and, Lord willing, I shall discuss this topic in greater depth in the future. For now, though, it is enough to know that 1) the cause of price inflation in money printing by the Fed, 2) the current method of measuring price inflation deliberately and significantly understates its true rate and 3) these facts are not reported in mainstream news outlets in order to keep the public in the dark about what is going on.

“So what,” you may ask, “does any of this inflation talk have to do with financial prepping?” Quite a lot, actually. If we understand that a falling dollar is the product of the Fed’s intentionally increasing the money supply too fast, we are positioned to understand ways of protecting ourselves against the ravages of price inflation.

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